Why India's largest oil producer has lower mcap than Zomato
What's the story
Oil and Natural Gas Corporation (ONGC), India's largest oil and gas producer, is being seen as undervalued by the market. Despite a market capitalization of some ₹3.1 lakh crore, the state-owned company is trailing behind food delivery giant Zomato in terms of market value. The reason for this discrepancy lies in the fact that ONGC's stakes in subsidiaries and minority investments make up over a third of its total market capitalization.
Market comparison
ONGC's market cap growth v/s Reliance, TCS
ONGC's market capitalization has only grown by 26% in the last 13 years. In contrast, other listed companies have seen their valuations skyrocket. For instance, Reliance Industries's valuation has skyrocketed from ₹2.43 lakh crore in July 2012 to ₹18.7 lakh crore today. Tata Consultancy Services (TCS) also saw its market cap rise from ₹2.42 lakh crore in July 2012 to ₹10.95 lakh crore now.
Portfolio value
ONGC's stakes in subsidiaries and minority investments
Despite its diverse portfolio, which includes major stakes in overseas investment firm ONGC Videsh and Mangalore Refinery and Petrochemicals Limited, the market has not fully priced in the value of these assets. ONGC owns a 71.63% stake in MRPL worth over ₹18,000 crore and a 54.9% stake in Hindustan Petroleum Corporation Ltd (HPCL) worth about ₹52,770 crore.
Minority stakes
Total value of stakes exceeds ₹1.07L crore
ONGC also has minority stakes in Indian Oil Corporation (14.20% worth ₹31,000 crore) and GAIL (India) Ltd (5% worth about ₹5,900 crore). The total value of its stake in subsidiaries MRPL and HPCL as well as minority investments in other listed companies exceeds ₹1.07 lakh crore, more than a third of its current market cap.
Minister's statement
Oil minister laments perception bias against PSUs
Oil Minister Hardeep Singh Puri recently lamented that state-owned oil public sector undertakings (PSUs) are heavily undervalued by the market. He said despite their profitability and contribution to the economy, investors have a "perception bias" that keeps their market value down. Puri also highlighted that in the last six years, three major oil marketing companies (OMCs), Indian Oil, Bharat Petroleum, and Hindustan Petroleum made a combined profit of ₹2.5 lakh crore.